Time to Advocate in Support of the Charitable Giving Incentive

100 Years of Giving DC Fly-In

Thursday, February 16, 2017

This year marks the 100th Anniversary of the Charitable Giving Incentive in federal tax law. Yet it is unclear what the charitable deduction will look like, or whether it will even exist, once Congress enacts comprehensive tax reform, perhaps as early as mid-summer. The impact of the giving incentive on the work of charitable nonprofits is too important to leave
the decision to back-room negotiations by politicians. Join your nonprofit colleagues in our nation’s capital on February 16 for the 100 Years of Giving DC Fly-In and take advantage of this opportunity to engage early in the legislative process so that policymakers in Washington can fully appreciate the impact of giving that supports work for their constituents in every community. The Fly-In is designed to demonstrate broad-based support for federal policies that enable charitable nonprofits to advance their missions in communities across the country. For more information about the event and to RSVP, contact the Charitable Giving Coalition with your name, organization and State/Congressional district. We look forward to seeing you on the 16th!

Nonprofit Nonpartisanship Under Attack

For more than 60 years, an important provision in the federal tax code has successfully protected charitable nonprofits, religious congregations, and foundations from being hounded by politicians, political operatives, and paid political consultants seeking financial contributions, endorsements, and more. That provision (pejoratively called the "Johnson Amendment" by partisans) is being threatened by both President Trump, who vowed at the National Prayer Breakfast last week that he intends to “get rid of and totally destroy” the protection, and legislation in Congress seeking to completely repeal (H.R.172) or substantially weaken it (S.264; H.R.781). Those promoting the three bills couch them as attempts to promote religious freedom. But the bills would have the effect of politicizing and thereby erasing the public’s high trust in charities, religious congregations, and foundations to benefit politicians and paid political consultants.

The National Council of Nonprofits issued a statement expressing “strong opposition” to these attacks on civil society. “Nonpartisanship is vital to the work of charitable nonprofits. It enables organizations to address community challenges, and invites the problem-solving skills of all residents, without the distractions of party labels and the caustic partisanship that is bedeviling our country. Indeed, current law is the reason that charitable nonprofits are safe havens from politics, a place where people can come together to actually solve community problems rather than just posture and remain torn
apart.” It further states, “Nonprofits are already free to exercise their First Amendment rights to advocate for their missions. Allowing political operatives to push for endorsements would put nonprofits in a position where they become known as Democratic charities or Republican charities and put missions at risk.”

Continue reading this initial commentary for responses of other national and state organizations. The National Council of Nonprofits has created a dedicated webpage on Protecting Nonprofit Nonpartisanship with analysis and other resources on this serious challenge to nonprofit identity, independence, and integrity. Please share statements issued in opposition, analyses, and other resources we can share with all.

The First 200 Days

Congressional Schedule Coming into Focus

After a bumpy start, congressional leaders have reached agreement on the policy goals they want to achieve in, as Roll Call reports, “an aggressive 200-day agenda that will have Congress rolling back regulations, repealing and replacing the 2010 health care law, funding a border wall, rewriting the tax code, expanding the veterans’ choice program, advancing an infrastructure package and avoiding a debt default — all before the August recess.” Individual initiatives and Senate confirmation of appointees will continue throughout the period, but here are the big-ticket items on
the schedule.

February

The current month is dedicated in the Senate to confirming President Trump’s appointees to cabinet and other high-ranking positions in the executive branch. The Senate also begins the confirmation process for Neil Gorsuch to serve as a Supreme Court Justice. Four congressional committees are tasked this month with writing bills to repeal and partially replace the Affordable Care Act (ACA or “Obamacare”). The issues the committees are dealing with have heightened urgency because $20 billion in insurance subsidies to the states may cease on February 21 if
the Trump Administration decides not to appeal a pending lawsuit challenging the Obama Administration’s decision to fund the subsidies.

March

March is the month slated by congressional leaders to complete action on repeal and replacement of the ACA. The federal debt ceiling also becomes an issue mid-month with the expiration of a deal struck in 2015, but the Treasury Department is likely to utilize “extraordinary measures” to continue borrowing money for three more months. President Trump is also expected to release his first budget proposals that would start the process for enacting a federal budget for the next fiscal year that begins on October 1, 2017.

April

Congress must turn in April to funding the federal government through the rest of the current fiscal year that ends on September 30. Congress passed a temporary funding bill last December to keep the government operating through April 28 to give the then-incoming Trump Administration the opportunity to weigh in on spending decisions. It is unclear whether President Trump will seek to begin making significant cuts to federal spending in the current fiscal year, or wait until FY2018 to seek to realign spending priorities.

May-June

By all accounts, the late spring/early summer will be devoted to two very big priorities: developing a Budget Resolution and spending plan for FY2018 and crafting comprehensive tax reform. The two go together because congressional leaders intend to pass tax reform using the procedural device of “budget reconciliation,” which allows certain types of bills to pass in the Senate with a simple majority and not be subjected to a filibuster requiring 60 votes. Also, some resolution of the question of whether to raise the federal debt ceiling will be needed in this time period.

July

Congressional leaders have vowed to have a comprehensive tax reform bill on the President’s desk by the beginning of the month-long congressional summer recess that is scheduled to begin on July 31.

Federal FastView

State Powers Under the Trump Immigration Executive Order: The Trump Executive Order that temporarily blocks entry of people from seven Muslim-majority nations also instructs the Secretary of Homeland Security to "devise a proposal" to give state and local governments "greater involvement in the process of determining the placement or resettlement of refugees in their jurisdictions." In late 2015, 31 governors, including then-Governor Mike Pence of Indiana, sought to prevent the resettlement of Syrian refugees into their states. A federal district court barred the action of the governors, ruling that the actions constituted discrimination on the basis of national origin, and last October the federal court of appeals upheld that decision. The federal government typically works through local nonprofits to help orient refugees to their new homes in the various states. On Friday, a federal judge in Washington State imposed a temporary, nationwide injunction on the Executive Order and the Ninth
Circuit Court of Appeals is likely to rule on the issue in the coming days.

Eliminating and Capping Regulations: Federal agencies must eliminate two regulations for every new rule implemented, according to an Executive Order issued by President Trump on January 30. The Executive Order also sets a Regulatory Budget on an agency-by-agency basis, allowing for centralized White House control on incremental costs imposed on nonprofit organizations and others. It further places a regulatory cap on the costs that may be imposed in rules during the current fiscal year (that runs through September 30). The cap may serve as a moratorium on major rules this
year.

Advocating for Arts Funding: Responding to the news that the Trump administration may seek to abolish several federal arts programs, Americans for the Arts sent a letter to President Trump asking him to preserve federal funding for the National Endowment for the Arts, National Endowment for the Humanities, and the Corporation for Public Broadcasting. The organization is also circulating a petition to the President that reinforces that message and is asking
members of its Arts Action Fund to get five colleagues to sign on.

More Budgets and State of the States

Through their State of the State addresses and budget proposals, governors across the country provide early indications of the direction of state policy action for the year. Here are some highlights of recent pronouncements that may affect nonprofits:

Budgets: The Governor of Louisiana is considering using the rainy day fund to close a $304 million budget deficit this year. Texas Governor Abbott is looking to hiring freezes at state agencies as a way to free up approximately $200 million in the budget. Arkansas Governor Hutchinson has asked state agencies for contingency plans for potential
budget cuts after a shortfall in revenues.

Health Care: Governor Baker of Massachusetts is seeking a $40.5 billion budget that includes raising revenue through fees on companies whose health coverage offerings don’t meet a set of state requirements, and placing limits on hospital prices.

State Challenges to Property Tax Exemptions Continue

Legislatures across the country are considering measures to chip away at nonprofit property tax exemptions by focusing on compensation of executives, granting power to local governments to weigh in, or rewriting the rules on the scope of the exemption. Bills in Montana and Connecticut would revoke the property tax exemption for any nonprofit that compensates executives more than a designated amount. Another Connecticut bill would empower local legislative bodies to deny tax exemption for property as a result of a change in ownership or change in use of such property on or after the effective date of the bill. Nonprofit hospitals in New Hampshire are targeted in legislation that seeks to limit property tax exemptions only to the main hospital campus.

Legislation in New York proposes a significant rewrite and narrowing of nonprofit property tax exemption. The bill would change the definition of "used exclusively" to limit the exemption to charitable purposes, something that would be "strictly construed" to exclude uses that are merely "helpful to the tax exempt organization." The measure also seeks to increase the burden of proof and severely narrow the definition of each tax exempt entity type (e.g., "educational purposes") required for substantiating the use of "each acre" to receive
property tax exemption.

Taxes, Fees, PILOTs

Taxes: Nonprofits running retail operations on the Kenai Peninsula in Alaska are now required to charge sales taxes as the result of a package of revenue raisers adopted last fall by the Borough Council. The borough ordinance overrides the existing exemption for nonprofits operating regular storefronts, such as the Salvation Army, which raises revenues to support its missions through stores located in Kenai, Soldotna and Homer.

Fees: The New Orleans City Council passed an ordinance that ends the common practice of waiving city fees for nonprofits when they hold certain events. The measure replaces the waiver with a discounted rate of about fifty percent of the cost for nonprofits wishing to hold special events in the city.

Perpetual Political Campaigns and Nonprofit Advocacy

When news that President Trump had filed a document on Inauguration Day paving the way for his 2020 re-election campaign, unfounded fears began circulating on the internet about whether that might inhibit nonpartisan nonprofits from responding to the actions of a politician who is formally seeking reelection. For example, can charitable nonprofits publicly support or oppose an Executive Order signed by someone seeking re-election without violating the tax-law ban on endorsing or opposing the candidate? The short answer is: Absolutely!

Nonprofit rights to speak out on issues of the day remain solid regardless of the campaign status of politicians. The Lawyers Alliance for New York issued a legal alert, exhorting nonprofits, “Don’t’ be scared into silence by false internet rumors.” It continued: “all public charities can:

criticize or praise sitting public officials, including the President, for actions that they take while in office;

take a position on issues, such as environment, refugees, or school reform;

take a position on specific government actions, including Executive Orders, and proposed laws and regulations.”

Such actions may count as lobbying, but they are certainly legal.

Likewise, Natalie Ossenfort with Bolder Advocacy, an initiative of the Alliance for Justice, writes that “if the President, or any other elected official, takes an official action as part of his or her official duties, we [nonprofits] are allowed to respond so long as our comments don’t rise to the level of campaign intervention.” The reason is that “as 501(c)(3)s, we can continue to speak out and hold government officials accountable for their actions even when they are also candidates for public office.”

Here’s your opportunity to learn how to create a voter engagement plan for your nonprofit to help those you serve and your broader community in 2017 and thereafter. Register now!

Worth Quoting on Nonprofit Nonpartisanship

“Politicizing churches does them no favors. … Inviting churches to intervene in campaigns with tax-deductible offerings would fundamentally change our houses of worship. It would usher our partisan divisions into the pews and harm the church’s ability to provide refuge.”

- Statement of Amanda Tyler, Executive Director, Baptist Joint Committee for Religious Liberty, February 2, 2017, published in response to comments by President Trump and the introduction of legislation to permit charitable nonprofits to endorse political candidates.

“No law or regulation restricts any faith leader from addressing politics from the pulpit, they just can’t use tax-exempt dollars for partisan politics.”

“Charities are supposed to be, and traditionally have been, outside of politics. Given the toxic political environment (and even without it), that is a good thing. … Do we want to tinge American’s generosity with political taint? And what about the private foundations and the large pots of money sitting in donor advised funds? With endorsements allowed, the spigots would open for this money to be put to political, not charitable, use.”

- Roger Colinvaux, Politics and Charities: Do Not Mix, Chronicle of Philanthropy, November 2, 2016, providing a thorough analysis of the reasons that repeal of the tax-law ban on partisan, election-related activities by charitable nonprofits and foundations “would have a disastrous impact.”

With Less State Aid, Localities Look for Ways to Cope, Governing, February 2017, reporting that states have cut revenue sharing with local governments to levels below where “they were before the recession,” which is putting more pressure on nonprofits and foundations to fill the financial gaps and address growing human needs.

Expect More Conflict Between Cities and States, Sophie Quinton, Stateline, January 25, 2017, explaining the tension between conservative-controlled states and progressive-led cities and counties, and how it is leading to state-preemption efforts on issues ranging from minimum wages and transgender issues to banning sanctuary city declarations.

Performance Accountability, Evidence, And Improvement, Shelley Metzenbaum and Robert Shea, National Academy of Public Administration and the Volker Alliance, October 2016, finding that even the best performance measurement regime, when implemented without “effective motivational mechanisms that encourage their thoughtful adoption, … can lead to a culture of compliance, fear, or even worse, falsification.” See also, The Problem With Evidence-Based Government, Mark Funkhouser, Governing,
January 2017.

The average rate of return for college and university endowments in 2016, down from 2.4 percent in FY2015, representing the lowest return since the beginning of the Great Recession. Despite lower returns, 74 percent of institutions were able to increase their FY16 endowment spending dollars.